MasterCard lowers its local tax bills through deals with Singapore’s Government
The wonderful thing about investigating multinational tax avoidance is that, despite the corporate spin and obfuscation, there is a hard number that you can always hang your hat on.
No matter the highfalutinÂ excuses from slick PR types and the rhetoricians of the corporate tax lobby for why such paltry tax is paid; no matter the illimitable complexity of tax laws and financial engineering, this precious number displays how much tax has been paid to the Australian Tax Office each year â€“ cash.It can be found in the cash-flow statement of a company’s annual financial statements â€“ unless the company has a special exemption from the regulator from having to disclose. Or unless the name of the company is Westfield Corporation,Â which bizarrely counterveils accounting standards by grouping income tax with withholding tax. And it can be found about six lines down from “operating cash-flow”, and it usually says “tax paid”.
So it is that once you have trawled the database, stumbled upon the relevant entity and paid ASIC the requisite fees, you will find, for instance, that global credit card giant MasterCard last paid $4.3 million in tax to the Tax Office. That was for the year to December 2014. This is lower than theÂ year before, when it somehow got $429,650 back from the taxman, which is nice work if you can get it.
The year before this, in 2012, MasterCardÂ managed to claw back $3.4 million from the Tax Office. During the past three years then, this world-wide colossus has parted with a lazy half a million dollars in tax.
To be fair, let’s take it back another three years. From 2009 through 2011, MasterCardÂ paid $33 million in corporate income tax. Three points can be made here:
- One, this is in accordance with the trend among multinational companies operating in Australia to pay increasingly less tax in recent years; to increasingly view tax as an optional thing that ought to be paid by the peasants.
- Two, MasterCardÂ is still a damn sight better than rival card giant American Express, whose Australian entity paid no net tax in seven years (it, too, used to pay more tax before that). Versus theÂ ATO, Amex even ended up $3.3 million in the black over seven years.
- Three, MasterCard’sÂ income, that is income deriving from Australians and earned on transactions inÂ AustraliaÂ â€“ as is the case with a host of multinationals â€“ wends its way via “service agreements” to funding hospitals, roads and schools inÂ Singapore.
The accounts of MasterCardÂ show that almost all revenue is from related parties,Â mostly, itÂ seems,Â from the parent company, Â MasterCardÂ Singapore Holding Pte Ltd. It is reasonable to assume, therefore, that Â MasterCard,Â like Google, simply rips its Australian income straight out toÂ SingaporeÂ and then pays a bit back via service fees to feign the raiments of civic respectability.
Indeed, the “principal activities” in the consolidated accounts of the head Australian entity are described as “providing services to its holding corporation and related corporations and investing holding” (sic).
No it’s not about delivering card services. Conveniently, for tax, it’s about providing services to an overseas related party.
Further, the accounts are of the bush-league, cut-down, “Special Purpose” variety â€“ rather than General Purpose â€“ as Â MasterCardÂ must reckon there are no other users of its financial statements than its parent. Well, there is a user right here, and like most multinational accounts, we reckon they are not up to scratch.
It is also fair to point out that tax is paidÂ not on revenues but on taxable profit. The likes of Â MasterCard,Â Google, eBay, Uber and others,Â however, don’t even recognise Australian revenue to their Australian entities. They rate this as revenue to some overseas entity, whether generated inÂ AustraliaÂ or not.
That’s one way to wipe out your tax obligation. The more traditional way is simply to get taxable income as low as possible by setting up payments â€“ royalties, dividends or interest â€“ to related parties in lower-tax jurisdictions.
This is the way Big Pharma does it, also the car makers, and American Express too. While paying no net tax, the latter has booked almostÂ $8 billion inÂ revenues from Australian customers since 2008. Of that total, $3.6 billion came from merchant fees and $2 billion from interest income on credit cards.
These numbers make the Â MasterCardÂ accounts appear quite suspicious, as Visa and Â MasterCardÂ would appear to have a larger slice of the card market than Amex. Yet Â MasterCard’sÂ total revenue was only $84 million in 2014 â€“ a fraction of Amex’s and lower than it was six years ago (at $109 million) â€“ and its operating cash-flow only $83 million. PwC would know more, it audits both.
SMH will take a look at Visa soon to establish whether the multinationals who dominateÂ Australia’s credit card issuance pay collectively much in the way of income tax at all, or whether they are here to whack all their tax liabilities on the taxpayer card.
Originally published Michael West of the SMH 29th February 2016